The Global Pharma/Health sector offers a strong investment case in the current scenario of moderating economic outlook in developed markets and the rapid recovery in the immediate aftermath of economies reopening post Covid. Companies in the sector offer attractive earnings yield along with healthy balance sheets and trade at moderate valuations. Current Relative P/E for the sector at 0.84 is well below its long term average.
Global Pharma majors reported strong operating performances for the recently concluded quarter. J&J’s pharmaceutical business, which developed the single-shot Covid vaccine, saw earnings growth exceed market estimates by 10%. Post the healthy performance for the quarter, the company has revised both its revenue and earnings guidance for the year. Other Pharma majors Roche and Novartis have also delivered healthy revenue growth of 8% (on CC basis) and 6% respectively. The entire sector is seeing a stream of earnings upgrades and this is yet to be fully reflected in the valuations of the sector thus presenting an opportunity.